LOSS MITIGATION PART 1 BANKS OVERWHELMED
July 27th, 2010
Before the spring of 2009, there was no standard set of rules for loan modifications in the United States or in Phoenix, Arizona.
Each lender in Phoenix, AZ had its own rules as to how they wanted to handle loan modifications. In most situations, the loss mitigation through loan modification process heavily favored the banks. Their main concern was to find a way to recover the money that a home owner was behind in payments. Generally, the banks would either increase the monthly payment or extend the term of the payments so that those late payments would just be paid off at the end of a loan. Usually, when the loss mitigation through loan modification process called for increased payments, the foreclosure of a property was only delayed by a few months, because there was no way that they could make a higher payment.
A new program, announced in the spring of 2009 by the Obama administration has changed the loss mitigation through loan modification process. The guidelines for loss mitigation through loan modification have changed. This program mandated that mortgage payments be reduced to just thirty one percent of the home owner's income. For many Americans, this meant that they could once again afford to pay their mortgage payments. The loss mitigation through loan modification process, appeared to be a great helping hand.
However, the program only covers mortgages through Fannie Mae, Freddie Mac and the FHA, but it is widely thought that most other lenders will choose to follow the guidelines for loss mitigation through loan modification as laid out by the Obama Administration. The Making Home Affordable Modification Program has placed the focus right on loss mitigation through loan modification. Many in danger of losing their homes to foreclosure didn't even know what loan modification was.
Since the program's inception, there have been scores of people flooding into banks to request loss mitigation through loan modification. With all of these people facing the time crunch to avoid foreclosure, this has placed the burden of a national housing crisis squarely on the backs of the Loss Mitigation Department at your bank and every bank.
Before the housing crisis and the crash of the real estate market, foreclosures were not very common. Most lenders and mortgage providers kept a staff of just a few people to handle loss mitigation. Foreclosures were not very common and loan modifications were even less common.
However, the times have certainly changed. Banks and lenders have increased the size of their loss mitigation departments exponentially. This has meant thousands of people needed to be trained to work with loan modifications and all of the other tasks that fall to the loss mitigation department at a lending institution.
There are horror stories abound regarding customers having to hound and hassle Loss Mitigation Departments to get their paperwork pushed through to avoid foreclosure. Loss Mitigation Departments are currently still understaffed, under experienced, and overworked.
Read Part 2 of our Loss Mitigation Report to Find a Better Solution to avoiding foreclosure.
Watch Kevin Kauffman and Fred Weaver of Group 46:10, Short Sale Specialists, on the daily Short Sale Power Hour.
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Fred Weaver is a founding co-owner of Group 46:10. He has been working in the financing/real estate business for over 7 years. Fred began his real estate career by working for a large wholesale bank as a processor and rate/lock specialist for home mortgages. After 2 years in the business, Fred transferred from the banking side of home loans to the mortgage side. While on the mortgage side of financing, Fred gained experience originating mortgages and processing files for Morgan Capital of Arizona, Inc.
Kevin is a founding co-owner of Group 46:10. He began working in the real estate business in 2007 after spending 8 years working in the finance industry for companies such as Bank One, Green Tree Financial, & GE Capital.